TREASURIES-Prices seesaw after US jobless and manufacturing data

By Luciana Lopez NEW YORK, Feb 1 (Reuters) - Prices for U.S. Treasuriesseesawed in choppy trading Friday after data showed a slightrise in the unemployment rate, but gains were checked by aseparate report showing U.S. manufacturing growth picked up inJanuary. Treasuries prices climbed, reversing earlier losses, afterdata showed a slightly higher unemployment rate in January,suggesting the Federal Reserve might not yet be ready to backoff its latest round of quantitative easing. Those gains in Treasuries were reined in by data showingU.S. manufacturing growth quickened last month. The numbers were "quite encouraging for both output andemployment prospects ahead," said Andrew Wilkinson, chiefeconomic strategist with Miller Tabak & Co. LLC. Nevertheless, analysts said monetary policy will effectivelybe on hold at the Federal Reserve until the unemployment ratecomes closer to 6.5 percent; Friday's data showed the rate at7.9 percent in January, up from 7.8 percent in December.

While there are elements of the jobs report to please bothbulls and bears, said Rob Carnell, an economist with ING Bank,"for now, however, this is further vindication" of the FederalReserve's expansion of quantitative easing in December andshould help limit the testing of 10-year yields seen over recentweeks. Expectations that the Fed will stay on hold longer thanexpected to help lower unemployment helped push rate futures and Eurodollar futures higher, as investors sawpolicymakers' ultra loose stance boosting inflation in comingyears. Five- and seven-year debt particularly outperformed asinvestors saw easing pushed out into those sectors. In December, the Fed announced a new bond-buying programthat also shifted more of its purchases into intermediateTreasuries, helping push those yields down at year-end. Thoseyields have rallied since, but touched a one-week lowon Friday of 0.8173 percent. The March 2017 Eurodollar contract rose 4 basispoints to 98.125, touching its highest since the start of theweek, as investors put on bets that the Fed will leaveshort-term interest rates near zero for years yet. The 10-year Treasury note last traded up 3/32 inprice to yield 1.976 percent, despite having yielded above 2percent earlier in the session. The 10-year notes have beentesting the 2 percent level all week, particularly onsuggestions that the euro zone debt crisis may be easing. But U.S. economic data has painted a mixed picture,including a surprise economic growth contraction in the fourthquarter, according to figures released this week. Further concerns on growth were kindled Friday as the jobsdata suggested "there's still a long way to go before the Fedturns off the monetary taps," said Paul Ashworth, chief U.S.economist with Capital Economics in Toronto. The 30-year bond last traded down 7/32 in priceto yield 3.180 percent, from 3.171 percent late on Thursday.